Industry Challenges

Download top trends and challenges:


The US health care delivery system is experiencing an unprecedented rate of change. New financial models, characterized by pay for performance, bundled payments and co-management bring forth important opportunity for knowledge of product impact on clinical performance and for product-related savings in the continuum of care. As improved product management and synchronization of products across service lines and settings of care become the standard for excellence in supply chain management, many of HSRC-ASU earlier-year trends are being accelerated in response.

Organizational Strategy

Economic & Clinical Value of Supply Chain Management: Supply chain management plays an important role in meeting organizational mission, achieving clinical value, innovation, financial viability, cost efficiency, service line effectiveness and strategic advantage. Necessary is strategy for both excellence in business fundamentals and optimal consideration of the product and its contribution to clinical quality, outcomes and value. Critical to support this is:

  • An “episode of care” perspective by supply chain leadership
  • Technologies that provide data, transparency and support metrics in sourcing, contracting, utilization management, risk management and clinical outcomes from product use
  • Service and support from external supply chain stakeholders that validate the integration of economic and clinical value

Supply Chain and Organizational Integration: Pressures on health care organizations has led to consolidation through mergers, acquisitions and other forms of strategic alignment. Business efficiencies, financial returns and support of clinical quality improvement from consolidation of supply chains have not been well demonstrated. Necessary for advancement is:

  • Management of the strategic fit between governance, infrastructure, culture, information technology and purchasing strategies
  • Involvement of supply chain leadership in senior level decision-making to assure that the evolving organizational design, technology standardization and metrics can meet the goals of integration
  • Executive articulation of the value played by supply chain in meeting organizational goals and the expectations for supply chain contribution to improved system performance
  • Supply chain accountability

Sourcing: Sourcing across the domestic and global marketplaces, initially carried out by distributors and GPOs, is now being pursued by large IDNs and regional purchasing coalitions. Manufacturers, facing the medical device tax, are continuing to seek savings through outsourcing in the global marketplace. Supply chain impact requires:

  • A focus on quality, safety and product design to meet both the clinical and economic goals associated with value-based purchasing
  • The development and implementation of a standards framework to reduce risk and assure product reliability and security

Collaborative Relationships and Trust

Hospital-Physician Relationships: New models of care are dependent upon clinical engagement and improved hospital-physician alignment. Health care cost pressures continue to drive hospital-physician collaboration and the pace of physician employment by hospitals. The goal is excellence in patient care, meeting benchmarks of quality, process efficiency, and better use of resources through a collaborative effort. Tenets for achievement of this collaboration include:
  • Delineation of clinical and economic goals and development of relevant metrics
  • Multi-disciplinary involvement
  • Movement beyond “just price” to “total value”
  • Knowledge that supply chain/products are one part of the effort

Collaborative relationships with Supply Chain Trading Partners: New models of integrated care and health care cost pressures continue to drive supply chain trading partner focus on relationships characterized by trust and collaboration. Success is linked to:

  • Products, service and support that validate the merge of economic and clinical value
  • Greater information sharing and transparency to redefine the purchasing paradigm from a cost-only model to a value-based model
  • Understanding of each other’s pressures and goals
  • Consolidation of sales force and reorientation to a collaborative focus
  • Communication about barriers to mutually beneficial relationships and joint effort to address their removal

Health Care Reform & Regulation

Supply Chain Impact on Cost and Outcomes: Movement from fee-for-service to risk sharing models of reimbursement, readmission penalties, value-based purchasing, meaningful use, the medical device tax and unique device identification compliance have led to the need for cost-cutting measures across the health care system, including supply chain, within a context of increased performance and outcomes. Continued progress requires:
  • Supply chain leadership in product cost reduction in the total cost of care, optimization of product choice and services, and support of quality measures, minimization of reimbursement reduction and readmission penalties
  • Supply chain role in innovation to meet new goals of health care
  • Development of the supply chain role in comparative effectiveness research

Unique Device Identification (UDI): The UDI Rule, finalized September 2013, will mandate manufacturers to assign unique device identifiers to their marketed devices. Attention is expanding to UDI use and a holistic approach to the integration of medical device information across health care systems. On-going research, education and national-level effort are focused on development of the clinical and business case for UDI use and on policy levers. Required is:

  • Focus on education, process change and software change/upgrades
  • Cross-disciplinary and multi-stakeholder engagement
  • A collaborative approach across health care organizations with open communication and feedback on issues of workflow, IT, interconnectivity and perceived obstacles
  • Supply chain delineation of its role in UDI use in clinical care and device documentation, adverse event reporting, medical device tracking and recalls
  • Supply chain support of research and national-level efforts focused on UDI

Pharmaceutical Track and Trace: The Drug Quality and Security Bill, signed into law November 2013, establishes a national system for pharmaceutical track and trace, thus supporting security and safety of the pharmaceutical supply chain. Achieving an effective program requires:

  • Clear knowledge of the variety of transaction points
  • Understanding risks associated at these transaction points where counterfeiting and contamination can occur
  • Implementation of standards and use of technologies to avert breaches in the drug supply chain

Information Technology (IT) and Data

Big Data. 2013 may be characterized as the year when the enormous potential of “big data” was recognized for health care. The process and tools to confidently and effectively utilize this data remain unspecified. Important opportunities include:
  • Supply chain engagement in development of the needed framework, partnerships and informatics for use of big data
  • Development of collaborative efforts and information sharing surrounding big data
  • Future use in
    • predictive modeling of risk
    • assessment of product performance
    • identification of clinical impact of products
    • R&D decision-making

Supply Chain and IT integration: Movement forward for greater connectivity between IT systems within patient care settings and across the health care supply chain is expected to support greater traceability, transparency, information exchange and data on medical products. Further IT integration requires:

  • Clear articulation of the value of integration and automated identification and data capture (AIDC)
  • Data to support the business and clinical case for needed investment
  • Engagement with IT professionals
  • Investment in resources to support connectivity and data exchange, including human resources, IT and scanners